© jasper white/stone/getty images © 2013 by cengage learning inc. all rights reserved.1 lamb,...

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© 2013 by Cengage Learning Inc. All Rights Reserved.1

Lamb, Hair, McDaniel

Chapter 11

Developing Developing and Managing and Managing

ProductsProducts

2013-2014

Explain the importance of developing new products and describe the six categories of new products

Explain the steps in the new-product development process

Discuss global issues in new-product development

Explain the diffusion process through which new products are adopted

Explain the concept of product life cycles

© 2013 by Cengage Learning Inc. All Rights Reserved.

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Explain the importance of developing new products

and describe the six categories of new

products

The Importance of New ProductsThe Importance of New Products


© 2013 by Cengage Learning Inc. All Rights Reserved. 4

Categories of New ProductsCategories of New Products

New-to-the-WorldNew-to-the-World

New Product LinesNew Product Lines

Product Line AdditionsProduct Line Additions

Improvements or RevisionsImprovements or Revisions

Repositioned ProductsRepositioned Products

Lower-Priced ProductsLower-Priced Products1

Explain the steps in the new-product

development process

The New-Product The New-Product Development ProcessDevelopment Process



New Product Success FactorsNew Product Success Factors

Long-term commitmentLong-term commitment

Company-specific approachCompany-specific approach

Capitalize on experienceCapitalize on experience

Establish an environmentEstablish an environment

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Exhibit 11.1Exhibit 11.1New-Product Development ProcessNew-Product Development Process

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a plan that links the new-product development process with the

objectives of the marketing department, the business unit, and

the corporation.


New-Product StrategyNew-Product Strategy

2


Idea GenerationIdea Generation

Customers

Employees

Distributors

Vendors

Competitors

R & D

Consultants

Sources ofSources ofNew-ProductNew-Product

IdeasIdeas

2


Approaches for New Product Approaches for New Product DevelopmentDevelopment

BrainstormingBrainstorming

Focus GroupFocus Group

The process of getting a group to think of unlimited ways to vary a product or solve a problem.

The process of getting a group to think of unlimited ways to vary a product or solve a problem.

The objective of focus group interviews is to stimulate insightful comments through group interaction.

The objective of focus group interviews is to stimulate insightful comments through group interaction.

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The first filter in the product development process, which eliminates ideas that are inconsistent with

the organization’s new-product strategy or are inappropriate for some other reason.

a test to evaluate a new-product idea, usually before any prototype has been

created. Often successful for line extensions.

ScreeningScreening

A Concept Test

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Business Analysis

Considerations Considerations in in

Business Business Analysis StageAnalysis Stage

Considerations Considerations in in

Business Business Analysis StageAnalysis Stage

Demand

Cost

Sales

Profitability2


DevelopmentDevelopment

Creation of prototype

Sketch marketing strategy

Packaging, branding, labeling

Promotion, price, and distribution strategy

Manufacturing feasibility

2


Simultaneous Product Simultaneous Product DevelopmentDevelopment

A new team-oriented approach to

new-product development where

all relevant functional areas and

outside suppliers participate in the

development process.

2


Test MarketingTest Marketing

The limited introduction of a

product and a marketing program

to determine the reactions of

potential customers in a market

situation.

2


Costs of Test MarketingCosts of Test Marketing

• Often take 1 year or more• Can cost over $1 million• Exposes new product to

competitors• Competitors can “jam” testing

programs with their own promotions

2


Alternatives toAlternatives toTest MarketingTest Marketing

Single-source research using supermarket scanner data

Simulated (laboratory) market testing

Online test marketing

2


CommercializationCommercialization

ProductionProduction

Inventory BuildupInventory Buildup

Distribution ShipmentsDistribution Shipments

Sales Force TrainingSales Force Training

Trade AnnouncementsTrade Announcements

Customer AdvertisingCustomer Advertising

Ordering MaterialsOrdering Materials

2

New-ProductNew-ProductSuccess FactorsSuccess Factors

Listening to customers

Producing the best product

Vision of future market

Strong leadership

Commitment to new-product development

Project-based team approach

Getting every aspect right


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Why New Products FailWhy New Products Fail

NOTE: Supplemental content – not in book.


• No discernible benefits• Poor match between features and customer desires• Overestimation of market size• Incorrect positioning• Price too high or too low• Inadequate distribution• Poor promotion• Inferior product

Discuss global issues in new-product development

Global Issues in Global Issues in New-Product DevelopmentNew-Product Development


Global Marketing QuestionsGlobal Marketing Questions

• Develop product for potential worldwide distribution

• Modify for unique market requirements

• Design products to meet regulations and key market requirements


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Explain the diffusion process through

which new products are adopted


The Spread of New ProductsThe Spread of New Products

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The process by which the

adoption of an innovation spreads.

DiffusionDiffusion


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LaggardsLaggards

Late MajorityLate Majority

Early MajorityEarly Majority

Early AdoptersEarly Adopters

InnovatorsInnovators

Categories of AdoptersCategories of AdoptersCategories of Adopters


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TrialabilityTrialability

ObservabilityObservability

Relative AdvantageRelative Advantage

CompatibilityCompatibility

ComplexityComplexity

Product Characteristics and Product Characteristics and the Rate of Adoptionthe Rate of Adoption


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Direct fromMarketer

Direct fromMarketer

Word of MouthWord of Mouth

CommunicationAids the

Diffusion Process

CommunicationAids the

Diffusion Process

Marketing Implications of the Marketing Implications of the Adoption ProcessAdoption Process


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Explain the concept of product life cycles

Product Life CyclesProduct Life Cycles


A concept that provides a way to trace the

stages of a product’s acceptance, from its

introduction (birth) to its decline (death).

Product Life CycleProduct Life Cycle


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Exhibit 11.2Exhibit 11.2Four Stages of the Product Life CycleFour Stages of the Product Life Cycle


Exhibit 11.3Exhibit 11.3Product Life Cycles for Styles, Fashion, and FadsProduct Life Cycles for Styles, Fashion, and Fads

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Introductory StageIntroductory Stage


High failure rates Little competition Frequent product modification Limited distribution High marketing and production costs Negative profits with slow sales increases Promotion focuses on awareness and

information Communication challenge is to stimulate

primary demand

5

Growth StageGrowth Stage


Increasing rate of sales Entrance of competitors Market consolidation Initial healthy profits Aggressive advertising of the

differences between brands Wider distribution

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Maturity StageMaturity Stage


Sales increase at a decreasing rate Saturated markets Annual models appear Lengthened product lines Service and repair assume important roles Heavy promotions to consumers and

dealers Marginal competitors drop out Niche marketers emerge

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Decline Stage


Long-run drop in sales Large inventories of

unsold items Elimination of all nonessential

marketing expenses “Organized abandonment”

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Exhibit 11.4Exhibit 11.4Relationships between the Diffusion Process and the Product Relationships between the Diffusion Process and the Product Life Cycle Life Cycle

Productlife cyclecurve

Diffusioncurve

Chapter 11 VideoChapter 11 Video

GaGa’s Inc.Jim King and his wife discuss how they decided to create the company GaGa’s Inc. using the product Sherbetter.

The line expanded from just Lemon to several other flavors as well as Sherbetter bars, the struggles of

branding, line extension, and other aspects of the frozen dessert market.

CLICK TO PLAY VIDEO


http://www.cengage.com/marketing/book_content/lamb_9781285091860/videos/ch11.html

© jasper white/stone/getty images © 2013 by cengage learning inc. all rights reserved.1 lamb,...

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